B2B Churn Rate: Don’t Be A Chump About Churn

Customer churn is a normal part of SaaS business models. Some analysts think an annual B2B churn rate of 15 percent is considered acceptable. But, you might be aiming for 10 or even 5 percent. In any case, a lot needs to go right for a customer to be happy with a new product or service, and it is impossible to please everyone. But if the churn rate gets too high, you need to quickly determine where the problem lies.

Your customer analytics can usually provide clues as to where users are struggling with your product. However, these datasets won’t tell you the whole story, such as the internal dynamics behind why a customer dropped you, or ways your solution fails to adequately address jobs-to-be-done. Worse still, your data may even be misleading you! Qualitative insights from customer conversations are the only way to understand the churn your customer analytics can’t explain.

Here are four reasons for a high B2B churn rate you may not have considered, based on conversations we’ve had with B2B buyers over the course of scores of 14+ years of market research projects.

1. There Were No Internal Champions in the Customer’s Organization

A lot of tools are meant for organization-wide adoption, not just for use by one person. However, if your service is so diffuse that it fails to excel at solving problems for at least one stakeholder, you’re unlikely to gain any strong advocates.

You’re more likely to earn a champion from narrowing your focus. Work on providing the best solution for one specific business problem, or a certain persona.

A champion can provide the push you need to gain widespread adoption, often against competing tools that other personas may prefer. This is especially important for products like encryption or security tools that an entire security team needs to approve. Champions can also be trained to help their colleagues learn your product. This is especially useful if your sales team is too small and busy to train large numbers of people.

However, internal champions don’t always fall into your lap. Often, those relationships need to be cultivated.

Unfortunately, customer service representatives or customer success teams don’t always provide the level of support needed to cement an internal champion. When this happens, the customer relationship stalls, or a different solution gains traction – and the account drops off the books.

To reduce churn, customer success teams need to take the time to build internal evangelizers who cement product adoption within an organization. Taking the time to win champions improves the odds that account stays with you.

2. You Didn’t Give Your Customers Enough Support

Deficiencies in documentation, training, and customer support can make life difficult for a customer. As a result, customers may not know how to use or troubleshoot your product, which could lead them to feel as though they’re not getting what they paid for. Deficiencies in support can also lead to low product adoption levels. All of this leads to a high B2B churn rate.

To make life easier for your customers, prioritize relationships with them.

B2B buyers, especially those making large purchases for enterprises, look for a partnership rather than a mere transaction.

As a result, they place a high value on great customer support.

One way to do this is to maintain a primary point of contact throughout the customer relationship. Typically, users will email customer support as a first step when they encounter a problem. Usually, they end up talking to a randomized or unknown support agent who first needs to get up to speed on their use case. This experience is incredibly frustrating for the user.

From our conversations with B2B buyers, we’ve seen that vendors who maintain a consistent point of contact with a customer cultivate higher levels of customer satisfaction. Customers find a lot of value in talking to the person who sold them the product, and are reassured that this person is personally invested in making sure the problem is solved and the customer is satisfied.

To keep customer churn at bay, prioritize consistent relationships with your customers and ensure they get the attention they need.

3. You’re Competing Against Open Source

Open source solutions have the potential to lure buyers away from you.

If you can’t prove that your product is better than the free open source alternative, you’ve lost a customer.

The differences between open source and closed source solutions are typically well known. What isn’t typically well known is how buyers feel about the options.

In our conversations with B2B buyers, we’ve seen how different groups within the same organization can be advocates for both open and closed source solutions. Since B2B purchases are group decisions, the purchase can depend on multiple decision makers finding value in a supported solution. The only way to know whether enough B2B buyers think it’s worth paying for the supported solution is through market research.

You must have a coherent strategy for demonstrating the differentiated benefits of your paid solution to reduce churn from customers going with free options.

Find ways to add value for buyers, like top-notch customer support or by producing plugins that solve problems open source users commonly encounter.

4. It’s Actually A CRM Problem, Not Churn

Sometimes, what you think is a churn problem might not be a problem at all. It might just be an issue with the customer relationship management (CRM) data.

Through the course of our market research, we’ve seen this a lot. For example, a situation might arise where multiple licenses are distributed to the same company. This is a common occurrence, since anyone can sign up for many SaaS products with just a credit card. However, a company might decide to stick with your solution and consolidate licenses. Your CRM might show that consolidation as a sudden drop-off in customers. Without accurate data, this might look like a big red flag, but, in reality, it’s not actually a problem.

Unfortunately, flawed CRM data does cause people to mistake consolidation for a high B2B churn rate. In this situation, any effort taken to resolve what appears to be a churn problem is just wasted effort. Understand the dynamic that led to the apparent churn, and save yourself the trouble.

Don’t Be a Chump About Churn

B2B customers leave for a myriad of reasons. If your data has stopped making sense, or if you’re confused as to why you’re losing customers, there might be some deeper issue that needs probing.

You’ll always have churn, but you don’t have to give in to it. Whether it’s a problem with your sales team, or a failure of customer support, or issues with your CRM, B2B churn research can reveal exactly why customers are leaving you (or if faulty data is just making it look that way). You, your organization, and your customers will be better off on the other side.

With over 14 years of experience in the B2B technology sector, Cascade Insights digs deep into the customer experience to help companies understand how to reduce churn. Learn more about our market research services here.

Special thanks to Scott Swigart, president & CRO, and Hercules Randolph, senior consultant, for advising on this piece.